The third major merger of Kentucky-based accounting firms in 10 months is nearly complete. Principals at Lexington-based Dean Dorton Ford and Cotton+Allen in Louisville have an agreement to create a new firm, which will be Kentucky’s second largest, ranked by total employees.

Dean Dorton Allen Ford would combine Cotton+Allen’s 89-year history and strengths in manufacturing and non-profits — practice areas where DDF is lacking — with the much larger DDF’s healthcare consulting and equine base, which the Louisville firm lacks.

With both firms signing a memorandum of understanding, the deal is scheduled to close before the end of the year. “The big issues are all out of the way,” said Mark Carter, who will become director of consulting services for the new firm. Carter added that he believes the deal will close by November 1. Carter, former Jewish Hospital, St. Mary’s Healthcare CFO, is managing director at DDF’s Louisville office.

Gwen Tilton, Cotton+Allen president, will be managing partner of the new firms’ Louisville operations while Richard Dorton, DDF managing partner, will become CEO of Dean Dorton Allen and Ford.

The deal could alter the balance of power between DDF and Mountjoy Chilton & Medley, the state’s largest, ranked by number of employees. Talks between DDF and Cotton+Allen officials began last November, two months after the creation of Mountjoy Chilton & Medley.

But Carter said the alliance has nothing to do with MCM. DDF’s Louisville operations “needed scale.” DDF opened a Louisville office, in 2007 to focus specifically on healthcare, an industry sector which represents about 85,000 jobs here. It would have taken at least five years “and maybe closer to 10” to build DDF’s Louisville operations on a scale comparable to the merger with Cotton+Allen.

As Dean Dorton Allen Ford, the two firms would have about 160 employees — approximately 100 in Lexington and 60 in Louisville, compared to Cotton + Allen’s 45 and DDF’s 115. And it would give Dean Dorton Allen Ford the depth to challenge MCM in almost every sector with the exception of banking.

M&A fever

The DDF/Cotton+Allen alliance is the latest in a round of mergers. MCM completed a merger earlier this month with Hawkins Company CPAs, which specializes in bank audits and regulatory compliance. Hawkins Company founder Henry Hawkins got an equity piece and now heads up MCM’s bank practice group, according to media accounts. That deal came only 10 months after MCM itself formed out of a merger of Mountjoy & Bresseler and Chilton & Medley.

With the Hawkins practice folded in, MCM now has about 250 employees including 130 CPAs working out of Louisville, Lexington and Covington. And don’t be surprised if more deals are forthcoming, with Mike Mountjoy and Richard Dorton both aspiring to add to the ledger sheets clients wrested away from large regional firms.

Just the facts:

What does a CPA make? Depends. A top accounting director earns about $146,000, according to salary.com, an on-line industry reference. A top auditing manager grosses about $127,000 per year. A top financial reporting accountant makes about $57,000. http://swz.salary.com/salarywizard/layouthtmls/swzl_narrowbrief_fa01.html

What do accountants do?: Yes, accountants track money flowing through businesses. But they also help those businesses comply with state and federal regulations, tax regulations and consult on improving clients’ internal operations such as compensation and employee benefits.